Processing fees, withdrawal fees and a good interest rate on top of it – a loan is often an expensive pleasure. After all, the banks live on it, especially in times of crisis, their business is secured. But nobody has to come to terms with it: A cheap online loan can save a lot of money.
Direct banks offer low effective interest rates
The banks obviously not only live fairly well on the income from loans, they also have to bear a lot of costs. For example, the dense network of branches with offices in small towns or advertising. In the end, the borrower also pays these bank expenses to a certain extent with its loan interest. Direct banks on the Internet have it much easier. You waive most of these costs, but usually no advice is offered.
The debtor should therefore be able to realistically assess how high the rates are that they can pay each month. But because a cheap online loan is only available with a good credit rating and without a negative credit entry, this risk of over-indebtedness is limited. Banks see their own capital at risk early on and typically only lend when the prospects for reliable repayment are very good.
Advice is not required
However, the debtor is completely on his own if he is to compare the different loan terms. The effective rate is the most meaningful. This includes not only the loan interest, but also all fees. The only exception: A frequently requested residual debt insurance, which secures the payment in the event of disability or unemployment, can cause enormous additional costs. By specifying the effective interest rate, loan costs are still quite easy to compare. Nevertheless, care should be taken to ensure that the share of fees in the interest rate is not too high. Because, for example, a payment fee is charged at the beginning – then the loan starts with costs.
Credit comparison easy and fast
A cheap online loan has the advantage that many offers can be obtained very quickly on the Internet. This means that many different providers can be compared with each other in a short time. Many lenders particularly advertise creating an offer within 24 hours. Because personal data is requested to calculate the conditions, special caution is advised. Some dubious providers use this data to their advantage, frequent advertising emails are the least evil.
Black sheep can be identified by conspicuously low interest rates or the requirement to pay a fee in advance. About 6 – 8% should be taken into account for small loans around 5000 dollars. This rate can be undercut if the income is very high and the repayment is correspondingly quick within 12 months. The longer the term, the more uncertain the interest rates can be calculated by the bank – for security reasons, they are slightly higher for the debtor. Such loan amounts are usually still approved if the income is above the garnishment limit and the credit gives the green light.
On the other hand, the situation is different with higher sums: direct banks also demand countervalue in the form of security. This could be a property or a young car, for example. This security covers the risk that the debtor will no longer be able to meet his credit obligations. Because a credit risk that is secured with a house, for example, is very low, the interest rates for building money are also particularly low. A cheap online loan is a real win.